The Bank of England’s Financial Policy Committee (FPC) has been established to lookout for risks and weaknesses across the financial system, since “a healthy financial system is a key part of a successful economy” (BOE).
Meeting at least quarterly, the FPC sets out their assessment of risks and weaknesses in the financial system and the measures it is taking to address them and publishes this within their Financial Stability Report twice each year.
When the FPC looks to determine the appropriate UK CCyB rate, it takes into consideration a number of ‘core indicators’ including:
The Countercyclical Capital Buffer Guide – Legislation reuires the FPC to consider this guide when looking to determine the CCyB Rate. The guide offers a simple metric identified in Basel III and EU legislation that looks at the gap between the ratio of Credit to GDP and its long-term trend.
Core Indicator sets that look at:
o Data on Sectoral Capital Requirements (SCR);
o Data on Countercyclical Capital Buffer (CCB or CCyB); and
o Housing Tool Data on Loan to Value (LTV) and Debt-service to Income (DTI) Limits